“Bitcoin will not discriminate against you, no matter your race, nationality, political beliefs, credit history, or social media history,” Matthew R. Kratter writes in Bitcoin for Beginners, a book that will teach you everything you need to know about this new form of digital money. Invented in 2009 by Satoshi Nakamoto, it was called a bubble, a Ponzi scheme, and a scam. Yet despite the controversy, it’s still alive and “once again making new all-time highs.” Bitcoin has also been called “the digital gold,” something that functions like money but can’t be controlled or issued by any government. The author writes:
If I work hard for 30 years and deposit my savings into a bank, I would like that money to be still there when I retire. The bank needs to be secure, both from thieves and from governments that might want to seize my savings. In most countries today, governments steal from their citizens in a much more subtle way than outright confiscation. It’s called “inflation.”
When I was a child in the 1970s, a Big Mac cost about 65 cents. Today, a Big Mac costs about $4.00 or more. We’ve all noticed how the same amount of money buys less stuff over time. We can call this “inflation,” or just say that the purchasing power of the US dollar falls over time. The US dollar is not a good store of value over long periods of time. The same is true for the Euro, the Yen, and pretty much all “fiat currencies.” They’re called “fiat” currencies because they are magically summoned into existence by central banks.
Then he adds:
In 2020, the US government has been issuing a lot of debt, and the Federal Reserve has been buying most of it with freshly printed money. This is called “debt monetization,” and it means that the US dollar will continue to rapidly lose purchasing power.
When you print a lot of money, the purchasing power of each piece of money (old and new) goes down. Hamburgers, houses, and hospitals get more expensive. Inflation is like a hidden tax on everything. It is how governments and central bankers steal from ordinary people.
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If I work hard for 30 years, I would like my savings not to be debased by central banks. When I retire, I want to be able to afford hamburgers and maybe even a steak. Storing your wealth in a fiat currency means that you will be eating dog food in retirement.
But Bitcoin is different. Kratter writes:
Bitcoin solves all of these problems. I can hold my Bitcoin in self-custody, and no one can take it from me. I’m not dependent on a bank or other third party. The Federal Reserve cannot devalue my savings that are held in Bitcoin. If the Fed prints more money, the price of my Bitcoin in US dollars will go up to compensate for this new money printing.
With that being said, he turns to common myths about Bitcoin:
Myth #1: Bitcoin uses too much energy and is bad for the environment.
Bitcoin miners do use a lot of electricity. Clickbait articles like to compare Bitcoin miners’ electricity usage to that of small countries. Of course, the same critique might be made of the Internet, which uses 10% of global electricity. You’ll have to decide for yourself whether cat videos and clickbait articles about Bitcoin’s energy usage are a good use of global electricity. I personally think that the internet is worth it [just like Bitcoin].
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Mining gold uses huge amounts of energy, and can be quite hard on the environment. The fiat financial system also uses a lot of energy. Think of all those Brinks trucks, and ATMs, and perpetually empty bank branches, with their heating and lighting costs. Printing up new paper money and coins also uses large amounts of natural resources and energy.
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Bitcoin is the most secure bank in the cloud. It is secured by real work carried out by Bitcoin mining computers. The high hash rate of the Bitcoin network (and associated high energy costs) ensure that it is a safe and secure place to store wealth. Bitcoin is a scarce, decentralized, seizure-resistant, and censorship-resistant way to store value. Why should something like that be free or low cost? Would you ever consider using a low-cost solution to secure a Picasso painting or the Hope Diamond?
Myth #2: Bitcoin is a Ponzi scheme or scam.
Bitcoin is completely decentralized. It is not controlled by one group, but rather control is spread across the community of miners, full nodes, developers, and Bitcoin holders. …
For something to be a Ponzi, you need a central ringleader like Charles Ponzi or Bernie Madoff. Most serious Bitcoiners will tell you that they will never sell their Bitcoin. This is not how pump and dump schemes generally work.
Myth #3: Bitcoin is just for criminals.
Simply not true. US regulators now allow US banks to custody Bitcoin. Anyone can buy Bitcoin using PayPal. Billionaires and blue chip corporations are moving their cash into Bitcoin. Anyone who says that Bitcoin is just for criminals has not been following the news. Bitcoin is now a mainstream asset, which anyone can hold.
Now this does not mean that there are no bad actors who use Bitcoin. Because there is no centralized authority who decides who can and who cannot use Bitcoin, anyone can use it— for good or evil. Just like anyone can use fire or a chemical compound for good or evil. That being said, the bulk of the world’s illegal and illicit activities are still carried out using US dollars.
Myth #4: The government will ban Bitcoin.
The U.S. government is certainly not going to ban Bitcoin anytime soon. Bitcoin will be regulated and taxed in the U.S., but not banned. A country that bans Bitcoin is like a country that bans the internet. It will lose its best and brightest and wealthiest, who will move to a more friendly jurisdiction. …
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The Bitcoin software is currently being run on more than 11,000 computers around the world: bitnodes.io A government can try to shut down all of the full nodes inside of its border, but how can it shut down the full nodes that are operating in another country?
Myth #5: Bitcoin has no value because anyone can easily create their own cryptocurrency.
Anyone can fork (copy) the Bitcoin software, but no one can fork the Bitcoin ecosystem. You can create your own cryptocurrency, but how are you going to persuade all of the full nodes, miners, developers, and investors to accept your new cryptocurrency?
I can easily create my own social networking software, but it doesn’t mean that I will be able to steal users from Facebook. The real value is in the network of people who interact with the software, rather than the software itself.
Myth #6: Bitcoin can be hacked.
Bitcoin cannot be hacked using current technology. If you google “richest Bitcoin addresses,” you will see list of public addresses that contain literally billions of dollars worth of Bitcoin. The Bitcoin is just sitting there out in the open, but no one can steal it. Bitcoin has never been successfully hacked. And it’s not like people haven’t tried. …
Bitcoin has been attacked many times, but has only gotten stronger. Quantum computers may be a threat to Bitcoin in the future, but they may also be used to defend the Bitcoin network. Anyone who doesn’t invest in Bitcoin because of quantum computing is like a person who refuses to buy California real estate because the whole state will be underwater in a few thousand years.
Myth #7: Bitcoin is too volatile to be a good store of value.
People who want Bitcoin to be non-volatile but still have the potential to go up 100x from here are living in a dream world. High volatility is the price to be paid for ultra-high investment returns.
Fortunately, one can adjust one’s position size in Bitcoin to take into account this volatility. A portfolio of just 1% Bitcoin and 99% cash has outperformed the S&P 500 over the past 10 years. If you put 1% of your portfolio in Bitcoin and it goes up 100x, you have just doubled your net worth. If you put 1% of your portfolio in Bitcoin and it goes to zero, you’ll hardly notice.
I have found it best for myself to simply dollar cost average into Bitcoin over time. I buy some Bitcoin, lock it away in cold storage, and never look at the price. If you check the price of Bitcoin every hour, you will get seasick. Bitcoin is a like a Picasso painting — you should just buy it, hide it in your attic, and come back in a decade to check on the price.
Bitcoin for Beginners is a wonderful read in its entirety. Complement with Van Gogh on the timeless value of real art.
I’m a freelance writer with 6 years of experience in SEO blogging and article publishing. I currently run two websites: MindfulSpot.com and OurReadingLife.com. While you’re here, get the latest updates by subscribing to my newsletter.
